The Competition Appeal Tribunal (CAT) has given judgment in the first private enforcement claim for damages to reach a full hearing, allegedly caused by a Chapter II infringement. Enron Coal Services Limited (ECS), an intermediary organisation arranging haulage services, alleged that the abuse of dominance in coal haulage by English Welsh & Scottish Railways Limited (EWSR), the subject of an Office of Rail Regulation infringement decision, had prevented ECS from securing lucrative contracts. The Tribunal concluded that ECS had failed to demonstrate a chain of causation between EWSR’s infringement and ECS’s inability to secure those contracts, particularly as there were factors other than price which made ECS a less attractive bidder.

This finding of infringement was made in November 2006 by the Office of Rail Regulation (ORR), which has concurrent jurisdiction with the OFT under the Competition Act 1998 in respect of the UK’s railway markets. EWSR was found to be dominant in the British coal haulage market, and to have breached the Chapter II prohibition by abusing that position of dominance, by adopting anti-competitive terms for four haulage contracts which accounted for the majority of British coal haulage volumes. One of these haulage contracts was entered into with ESC, and was based on discriminatory pricing structures. In addition, the ORR found that EWSR had adopted predatory pricing to prevent a new entrant (Freightliner Heavy Haul (FHH)) from establishing market presence.

In June 2000, Edison Mission Energy Limited (EME) issued an invitation to tender for rail haulage services to serve two of its power stations; EWSR succeeded with its bid, whereas ECS failed. ECS brought a claim before the Tribunal under section 47A Competition Act 1998, alleging that EWSR’s anti-competitive behaviour had caused it to lose this tender, and further, that EWSR’s conduct had also prevented ECS from securing a lucrative “end-to-end” contract (including both supply as well as transportation) for coal with the EME Ferrybridge C power station.

Evidential issues

Initially, the Tribunal was asked to determine which findings of fact made by the ORR were binding upon it in assessing damages. The parties agreed that section 47A(9) Competition Act 1998 bound the Tribunal to any prior finding of infringement by a regulator holding concurrent jurisdiction with the OFT - here, the ORR – though they differed on whether the Tribunal is similarly bound to apply other findings of fact in the regulator’s decision. ECS alleged that section 58 of the Act binds a “court” (which ECS argued included the CAT) to adopt any findings of fact which are made by the regulator in the course of an investigation.

The Tribunal rejected this argument, stating that section 58 of the Act is purely a timing provision, determining when a decision of a regulator becomes binding after the time for an appeal has expired, and does not in any way affect which findings of fact will bind the Tribunal. Section 47A(9) was held to be the relevant provision in this respect, and only binds the Tribunal as to the facts establishing infringement; nevertheless the Tribunal stated that it would give due consideration to the ORR’s other findings of fact.

Claim for loss of opportunity

For ECS to succeed in its claim, it would need to prove that, on the balance of probabilities and in the absence of EWSR’s anti-competitive behaviour (the “but for” world):

a) it would still have submitted a tender to EME for the two haulage-only contracts on the basis of prices set by EWSR for the haulage element; and

b)it would have actively sought-out an opportunity to negotiate with EME for the “end-to-end” contract for Ferrybridge C; and

c)as any loss depended on what a third party (i.e. EME) would have done, that there was a real and substantial chance that EME would have reacted to a) and b) by awarding the contracts which ECS sought (derived from Allied Maples Group Ltd. v Simmons & Simmons [1995] 1 WLR 1602).

The Tribunal found that on the balance of probabilities and “but for” EWSR’s market abuse, ECS would still have contracted with EWSR for its haulage requirements if it won contracts from EME. EWSR’s only competitor – FHH – was a relatively new entrant to the market, and the Tribunal found that it would have needed to source more rolling stock to meet ECS’s demands, and impose minimum volume requirements to finance that rolling stock. Coupled with higher freight rates, these factors rendered FHH an unattractive alternative to EWSR. Therefore, the Tribunal was satisfied that EWSR prices would have formed the basis for ECS’s bids to EME.

The Tribunal found that, in any event, ECS would have been at a competitive disadvantage in the “but for” world when bidding for the June 2000 tender. The evidence which the Tribunal examined showed that there were other reasons why ECS’s bids would not have succeeded, including the lack of flexibility in the bid submitted by ECS (due to minimum volume obligations); and a preference of EME to avoid intermediaries and to contract directly with suppliers and hauliers. Therefore, the Tribunal concluded that ECS had not demonstrated that it would have won the June 2000 tender “but for” EWSR’s anti-competitive practices.

Equally, the Tribunal could not find any suggestion that ECS would have actively pursued an end-to-end contract with EME, primarily due to a severe deterioration in their commercial relationship during a prior equivalent contract. Therefore, on the balance of probabilities, it could not be said that ECS would have pursued this but for EWSR’s conduct. The real world evidence did not show ECS to be a determined bidder and this was an important factor in preventing a chain of causation.

Further, from EME’s perspective, Ferrybridge C already had suitable coal supply arrangements in place with Powergen, and if anything, EME would have sought “top-up” supplies from other contractors to supplement this. Therefore, on the balance of probabilities, ECS had no reason to expect that there was a possibility of successfully negotiating with EME for an end-to-end contract.

The Tribunal therefore rejected ECS’s claim for damages, on the grounds that price was not the only factor which would have influenced either the decision of EME to award EWSR with the June 2000 tender for haulage or the apparent lack of enthusiasm on the part of either ECS or EME to negotiate an end-to-end contract.

Comment

Both the European Commission and the OFT have made significant efforts to promote awareness of private enforcement options in recent years. As the first occasion where a damages claim in the CAT has reached the stage of full hearing, it was hoped that this would provide a clear precedent for future private damages actions. However, the claim was defeated only because no causation could be shown between the infringement and any loss. Moreover, it is a useful example of the application of the “loss of opportunity” principles in the context of anti-competitive pricing effects, and the weight accorded to the actual contractual relationships between the parties concerned as an indication of what would or would not have happened “but for” for the infringement.